IPPs: Africa’s Answer?

Addressing Africa’s desperate need for power generation, the Power Projects Panel at Africa Oil & Power 2017 tackled some of the critical challenges to achieving universal access on the continent, especially a lack of fund in a cost-intensive industry, the role of funding mechanisms and regulatory frameworks play in attracting the necessary investment, the role of Independent Power Producers on the continent and what it will take to light Africa.

The expert panel, which gathered in Cape Town in June, included Pablo Memba, Managing Director of Equatorial Resources; John Jeffers, Group Director Oil & Gas of SNC Lavalin; Diederick Bax, New Business Development & Commercial Manager for Shell and Ann Norman, General Manager SSA, Pioneer Energy; as well as moderator João Marques, Energy Market Analyst and Author.

“We are going to be talking about independent power projects, to understand what are the challenges, what can be done and if it really is the right answer for Africa’s power problems. And, above all, what we are going to try to figure out is how to power Africa and how to bring power to all of these people,” said Marques in opening the panel.

The panelists agreed that African countries need detailed master plans, and these master plans need to address the small details in order to be successful. Once created, there needs to be better implementation and coordination of the master plans and regulations throughout the continent. Too often, a lack of government coordination and a failure to properly enforce regulations will delay or derail power projects. And in the highly competitive field of power generation, African countries need to present investors with an attractive environment for investment.

To this end, pricing and tariffs are vital. Governments in Africa are often forced to subsidize the price of power for consumers, making the African power sector less appealing to investors, especially when government guarantees cannot be provided.

Funding, the panelists said, is the largest obstacle for success. Financing will be available, however, for the right projects under the right regulatory terms. Export-import banks, such as the African Export-Import Bank, are playing a key role in the development of power on the continent.

With 600 million people on the African continent lacking access to power, and with governments pushing for investment, Africa is a prime place for independent power producers, the panelists agreed.